Analysts said the greenback had strengthened on the back of the improved US producer price index (PPI) and renewed speculations that the Federal Reserve will tighten interest rates growth faster than expected.
At 9am, the ringgit fell to 4.4245/4.4290 versus the greenback from yesterday’s closing of 4.4020/4.4060.
According to reports, the US PPI — which measures what suppliers are charging businesses — rose by 6% year-on-year in January 2023.
SPI Asset Management managing director Stephen Innes said yesterday’s PPI scorcher confirmed “higher for longer” interest rates.
“Consequently, the 10-year US Treasury yields are climbing, putting further pressure on longer-duration assets. The constant back and forth between higher inflation and fears of more US Federal Reserve (Fed) hikes have US stocks wavering under recessionary storm clouds,” he told Bernama.
He said that while this environment is typically positive for the US dollar with yields elevated and stocks lower, the path forward also depends on how the Fed reacts to this recent data string.
“But if recession fears start to build in earnest, I suspect the US dollar’s days in the sun could be numbered. In the meantime, it is tricky to fight this uptrend,” Innes added.
Back home, the finance ministry said amid the speculation, the ringgit has reversed its downtrend and appreciated by 10% from Nov 1, 2022 to Feb 8, 2023 to hit RM4.2983 against the US dollar.
As global investor risk sentiment improved, the ringgit had also strengthened against the currencies of Malaysia’s main trading partners, as reflected by the ringgit’s nominal effective exchange rate (NEER) which increased by 3.2% during the same period, the ministry said in a statement yesterday.
Meanwhile, the ringgit was traded lower against a basket of major currencies, except versus the British pound where it improved to 5.2921/5.2975 from 5.3075/5.3123 at yesterday’s close.
The local unit eased against the Japanese yen to 3.2962/3.2998 from 3.2883/3.2915 yesterday, fell vis-a-vis the Singapore dollar to 3.3070/3.3109 from 3.2989/3.3024 and weakened versus the euro to 4.7165/4.7213 from 4.7101/4.7144 previously.